UNAUTHORIZED HACKING

The term "computer hacking" traditionally describes the penetration into computer systems, which is not carried out with the aims of manipulation, sabotage or espionage, but for the pleasure of overcoming the technical security measures. In practice, this kind of offense can be frequently found. As far as damage is concerned, a differentiation must be made. In numerous cases, the attacked computer user is not actually harmed, but only endangered. Contrary to this, considerable damages occur in other cases especially when the perpetrators later use their knowledge for committing espionage and sabotage. In any case the "formal sphere of secrecy" or the integrity of the concerned computer systems is violated. Also it is very tough to draw a dividing line between what can be considered mild and what endangers life. Consider someone breaking into the online flight system of an Pakistan Airlines flight. He or she is definitely endangering the lives of those on board though it may have been done for fun's.

To get access and verify the record being hosting in remote services often requires the use of hacking to get access to records. The use of hacking as legal tools requires use of hacking soft wares with most modern technology and means employed to curb any evasion of tax and verify the e- record.

No specific statutory provisions are available for the defining the authorized hacking rights on the part of tax officer.

SECURITY AND PRIVACY ISSUES OF WEB HOSTING SITES

In numerous Western legal systems, the first "computer-specific" reforms of law during the 1970s and 1980s concerned the protection of personal rights and privacy in particular. The relevant legislation was a reaction to new challenges to privacy by the increasing possibilities of electronic data processing to gather, store, connect and transfer personal data. The traditional provisions for the protection of secrecy only covered part of the personality right and proved to be far too narrow for a protection against the new dangers. A differentiation in criminal data protection law which can be found in all countries today results from this historic development: Traditional offenses for the protection of secrecy (e.g. for doctors, lawyers or public officials) can still be found in the core of criminal law, i.e. the Criminal Code. Personal data receives indirect criminal protection by general criminal provisions that are not limited to personal data . We can therefore speak of an international wave of reform, which clearly shows the common problems of all national legal systems.

There are often Immunity is provided against disclosure of information relating to security procedure, no person shall be compelled to disclose any password, key or other secret information exclusively within his private knowledge, which enables his use of the security procedure or advanced electronic signature shall not confer any immunity where such information is used for the commission of any offence under any law for the time being in force.

The most formidable task is getting access to remote data is the shelter being provided by the remote hosting site for maintenance of the privacy and security of the database. The right to breach the security right as statutory is not possible in case of hosting of data at remote server, unless the tax payer be compelled to facilities the access to e-data.

AUTHENTICATING THE INTEGRITY OF BUSINESS RECORDS

With conventional commerce original records are paper-based and can be examined for the attributes of authenticity and integrity. Since, with e-commerce transactions, the original documents are stored in electronic form the comfort of physically viewing the originals knowing that they are unaltered does not exist. However, software is being developed to identify alterations to computer records. Specific accounting software may also be deployed for this purpose. Many of us in the workplace feel more comfortable with paper-based records. But is this comfort an illusion? Paper records can be altered, lost or falsified. So too can computer records. The fact is that we are familiar with the tools and procedures for checking paper records. Whereas, he tools for validating computer records are new and, perhaps, less intuitive. Revenue authorities are likely to reach a number of conclusions to do with this over the next few years:

* Computer audit means more and different training of staff.

* Once staff is trained, computer audit will have advantages over traditional audit in terms of speed, precision and flexibility. It will be seen as the only way to audit large companies, in particular.

* Computer audit will make it easier to examine both accounting systems and the records which go to make up those systems. Overall, it is not the fact that records are paper or computer-based that matters.

What matters for Revenue is that businesses more likely to perpetrate tax fraud are identified through correct risk analysis. This does not depend on the nature of the records as between paper-based and computerized. In conclusion, Revenue auditors will require a higher level of computer skills in future to allow accurate interpretation of computerized records systems. It will also be necessary for Revenue auditors to have systems analysis skills to validate the data models used in a given accounting environment. They will also need manipulation skills to accurately trace transactions through such systems. The computer software industry is aware of potential for loss of audit trail arising from business being conducted on the internet. As mentioned already, the industry is developing techniques to ensure the integrity of electronic records. An example of this is a technique called "message digests". A message digests works by attaching a unique message to an electronic record. Any subsequent change to the record can be detected by comparing the original digest with a newly created digest based on the current state of the file data. Once again we see an emerging overlap of interest between the public and private sector; both are keen for ecommerce to work well and both face common problems. The point has been well made that the private sector, particularly the auditing profession, has the same interest as tax auditors in safeguarding the integrity of e-commerce records. One area of focus is the impact of significant electronic processing of information on the auditor's ability to rely on substantive, observable evidence in the conduct of an audit.

FILING OF TAX RETURN OF E-BUSINESS AND FURNISHING EVIDENCE

Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This concept is recognised in all tax statutes, which sets out taxpayers' primary obligations, and clearly spells out that taxpayers are required to determine the amount of tax payable correctly and to pay it on time.

Disclosure in this context serves two main purposes. First, it is necessary to provide information for audit selection. Secondly, disclosure is relevant to the issue of the abatement of penalties.

Taxpayers have a statutory obligation to disclose to the Commissioner in a timely and useful way all information required to be disclosed under the tax laws. Disclosure here covers items specifically required to be disclosed by statute, and items for which disclosure is required by the Central Board of Revenue Department. For income tax, under section 26 of sale tax act 1990 and 114 of income tax ordinance 2001, the departments requires a complete statement of the taxable income of the taxpayer for the preceding year, together with such other particulars as may be prescribed. The department's disclosure expectations cover any requirements set out in a particular tax return, in the guide accompanying a particular tax return, or matters for which a specific disclosure form is prescribed.

In the area of tax returns and compliance, electronic commerce may create new variations on old issues as well as new categories of issues. These developments require that practical techniques be developed to deal with these technological innovations. These technological developments touch on a wide range of issues affecting the filing of tax returns.

Electronic commerce is still developing and no electronic money system has yet achieved widespread usage. Nevertheless, it is important to consider these issues now since some issues may require that the needs of filing and providing of tax returns be considered tax returns be addressed while electronic commerce systems are still under development, the filing of tax return of e-business and furnishing evidence. Commerce on the Web can actually facilitate compliance with consumer disclosure requirements.

IDENTITY OF PERSON LIABLE TO FILE RETURNS

A New Yorker cartoon once featured two dogs sitting in front of a computer with a caption that read "[O]n the Internet, nobody knows you're a dog." Tax administrators face a similar issue.

Under clause (a) subsection 1 of section 114 of Income tax Ordinance 2001 has make it obligatory on Every person and company regarding filing of the tax return, "?subject to this Ordinance, the following persons are required to furnish a return of income for a tax year, namely (a)Every company and any other person whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year;"

Under section 26 of Sale Tax Act 1990 has make it obligatory on every person and company regarding filing of the monthly tax return, "?Every registered person shall furnish not later than the due date a true and correct return in the prescribed form to a designated bank specified by the Board, indicating the purchases and the supplies made during a tax period, the tax due and paid and such other information, as may be prescribed" Under section 26AA of Sale Tax Act 1990 has make it obligatory on every person and company regarding filing of the Retail tax return, "?Every person required to pay turnover tax shall furnish a true and correct return in the prescribed form to the Office of the Collector having jurisdiction indicating the value of supplies made in tax period, the tax paid and such other information as may be prescribed."

Identification of the parties to a transaction is a necessary first step in determining what the tax liability is for the transaction and who is liable for any tax payable. In relation to e-commerce, special difficulties are presented. Where business is done through a website the tax authorities must be able to link the website with the "real world" physical parties behind it. A website can easily conceal the true identity of the person benefiting from any business it does. On the Internet it is possible to use a false identity and it is not currently possible to independently verify a party's identity. This raises a number of issues because the identity of counterparty is important for numerous tax provisions.

Similarly, unless tax administrations actively look for signs that existing businesses are involved in e-commerce the existence of a website could remain undetected. Furthermore, websites can quite easily be set up offshore or offshore websites can "front" onshore business. It is imperative for Revenue to encourage voluntary disclosure of websites used as part of the selling and, possibly, distribution functions of a business. As a modest first step, tax forms will need to be changed to ask about e-commerce and to get the website address of any business selling on the internet.

Finally, how the tax returns and other documents are to be attached as provided in tax provisions.

ELECTRONIC CASH AND ISSUES OF BANK SECRECY

The developments in electronic payment systems have the potential to create "electronic money." Electronic money is a broad term, and just as electronic money systems differ in their technical features, they also differ in the extent to which they create issues for tax returns. Depending on the type of system used, electronic money can be either an advantage or a disadvantage for collection of taxation.

The use of electronic cash as a means of transacting internet business may prove to be an acceptable alternative to credit card payments . It is reported that the withdrawal of major players from the attempt to develop e-cash is a significant setback. "?The use of digital or electronic cash in e-commerce transactions could lead to difficulties for Revenue auditors. Revenue auditors have traditionally had to grapple with the lack of controls associated with the cash economy. The increasing sophistication of business transactions and the development of a variety of payment methods have meant that cash payments have become a diminishing feature of business transactions."

The electronic money poses a tax evasion potential similar to that created by paper money. This raises the issue of whether the evasion potential is manageable and what must be done to manage it. It is possible that the techniques that have been developed over time to combat evasion using paper money can be adapted and expanded to combat evasion through electronic money.

The Electronic money creates opportunities to deposit unreported income in a bank or other financial institution. As a result of electronic money's advantage in transmitting large amounts of money with relative ease, combined with the continued use of cash, the problem of an underground, unaccounted for economy is likely to be exacerbated.

Electronic money and the Internet substantially increase the ease and safety with which bank accounts can be opened abroad, letterbox companies and trust accounts can be established abroad, and funds transferred anonymously. Such accounts are, of course, subject to the reporting requirements for foreign financial accounts.

The writer is an advocate of High Court and practicing immigration and corporate laws in Pakistan since September 2001. He is a self employed and pioneer in research on electronic commerce taxation in Pakistan. His articles were published widely in the critical areas of cyber crimes, electronic commerce, e-taxation and various other topics. He wrote LL.M thesis on titled "Legislation of electronic commerce taxation in Pakistan" in which he provided comprehensive legal proposals for statutory reconstruction of tax laws for purpose of imposition of taxation on e-business in Pakistan. Currently he is conducting is research on topic 'Electronic commerce taxation: emerging legal issues of digital evidence'.

Author can be contacted by Adil Law Company (Advocates and Immigration lawyers) Office No.3 2nd Flr Hafeez Chambers 85 The Mall Rd Lahore Pakistan Telephone: +9242-6306195 +9242- 6360108 Fax: + 9242 6360108 Cell: +92300 4254910 E-mail: adil.waseem@lawyer.com